Binance has faced a significant decline in its trading volumes following the discontinuation of zero fees on Bitcoin pairs and in light of the US Commodity Futures and Trading Commission’s (CFTC) lawsuit against the exchange. Crypto analytics firm Kaiko reports that Binance’s market share has dropped by an astonishing 16%. However, despite this decrease, Binance continues to maintain its position as the largest cryptocurrency exchange globally, with a market dominance of 54%.
The Impact of Regulatory Actions
Kaiko’s analysis reveals that none of the 17 other exchanges evaluated by the firm managed to capture a substantial portion of the market share. This can be attributed to the vanishing volume of Binance. The CFTC’s lawsuit against Binance comes after its allegations of operating as an illicit US commodity exchange. Similarly, other major US-based crypto players, including Coinbase and Kraken, have also faced regulatory scrutiny.
Furthermore, Binance’s US platform, Binance.US, has experienced growth despite the legal challenges faced by its global parent company. During Q1, Coinbase’s market share dropped from a weekly average of 60% to just 49%. In contrast, Binance.US has seen a significant increase from 8% to over 24%. This suggests that the decline in Binance’s market share may be more influenced by the removal of zero trading fees on BTC pairs rather than regulatory concerns in the US.
Impact on Trading Volumes
The termination of zero-fee trading on BTC pairs coincided with a notable decrease in overall trading volumes within the cryptocurrency market. According to The Block, the seven-day moving average volume dropped from $46 billion in mid-March to approximately $22.5 billion as of Monday. However, despite lower volumes, analysts remain optimistic that various macroeconomic factors will continue to drive demand for cryptocurrencies.
“If US regulatory concerns were truly impacting Binance’s trading volumes, we would expect Binance.US to experience the initial decline. The fact that Binance.US has seen growth suggests that the removal of zero fees may be the primary driver of the market share loss.” – Kaiko
These macro tailwinds include the belief that the Federal Reserve will not undertake significant tightening measures and may even engage in rate cuts, which negatively affects the US dollar and bond yields, thereby benefiting the crypto market. Additionally, concerns about a potential banking crisis have led to increased demand for decentralized financial systems, in which cryptocurrencies play a significant role.
